FinCEN Adds ‘Money Transmitter’ Tag to Virtual Currency Payment Systems

The Financial Crimes Enforcement Network (FinCEN) recently released new guidelines for bitcoin payment processors and trading exchanges. As per the U.S. law, such virtual currency companies may be considered as money services businesses. The chief U.S. money laundering and terrorist financing regulator expressed that bitcoin exchanges may act as money transmitters even though theses exchanges bring together buyers and sellers on their platform.

It was revealed that such ‘money transmitter’ guidelines may be applicable to bitcoin processors along with the bitcoin exchanges. This is quite surprising as companies like BitPay have indicated earlier that their services are exempted from FinCEN’s guidelines as they simply facilitate purchases between merchants and consumers, only aiding in transfer of funds.

Marco Santori, an attorney at Pillsbury Winthrop Shaw Pittman, explained in an exclusive interview with CoinDesk what the FinCEN’s latest guidelines actually imply. He mentioned that companies involved in transactions can be exempted from the guidelines only if they are Bank Secrecy Act (BSA) regulated institutions. For example, credit card processors, which transfer funds between customer and merchant banks, are deemed as such regulated institutions.

Santori further quoted to CoinDesk: What most payment processors do today is just accept people’s bitcoin, wherever those bitcoins may be from, possibly their own wallet software and accept those coins and send them on to the merchant using whatever software they might be running. What this is saying is that if you're a merchant payment processor and you're performing that facilitation you're not exempt from the rules, in fact, you're a money services business.

Andrew Ittleman, an attorney at Fuerst Ittleman David & Joseph, also expressed his views on the implications of the ruling and mentioned that this could affect the way the entire virtual currency would be treated by FinCEN. He is of the view that there are no limitations to the implications by the new rules and every bitcoin company may end up being defined as a money transmitter. If this is so, then bitcoin companies in the U.S. would be required to adhere to additional reporting and compliance standards.